In Alberta as in any other parts of country owning your own business is a dream come true for many. That dream however is under constant threats from different problems that could arise. First there is always the risk of liability – the threat of legal (and financial) consequences as a result of improper business practices . The risk may come from within your own staff or it might involve private citizens or clients. Liability insurance is therefore an important part of doing business as this will protect you from those threats to your dream. As you consider the right insurance for your business keep in mind the liability risks for small businesses in Alberta:
1. On-site Injury (Employee Work-Related Injury)
No matter how safe your business is an injury could come out of nowhere. Perhaps old machinery leaks oil or toner dust spills next to the copier and the next thing you know an employee slips and injures themselves. Or perhaps a task that’s been repeated and carried out safely over many years suddenly causes an employee to develop an injury even if the task appears harmless.
2. Employment practices
These are generally complaints from staff or potential hires. While there might be no physical injury your small business could still incur substantial legal and compensation costs. The most obvious reasons for complaint are workplace discrimination harassment or wrongful termination. There is also “breach of contract.” For example an employee may think you promised him a promotion which he lost to another employee or a contractor may have expected more than you paid him.
3. Damage due to product or service failure
Damage from product failure means your goods functioned or malfunctioned in a way that physically injured someone. A famous example is the woman burned by boiling-hot coffee. Damage from service failure is less clear-cut. It implies that your small business claims a level of expertise it doesn’t have. Examples of this might be medical malpractice or faulty accounting. These are called “errors and omissions” and there is a specialized liability insurance exclusively for this.
4. Cyber liability
This risk is so new that you’re excused if you haven’t yet considered how it might affect your small business. But now you know you need to start thinking about it!
Your business is liable for all “risks associated with use of electronic data and the internet.” As this article describes there isn’t yet any standard for coverage so you need to be aware of all possibilities: interruption of business cost of extortion government fines damages to your client base and restoration of services.
5. Slander and libel claims
This includes claims against your business and claims your business might need to make against other persons or organizations.
6. Extras risks pertinent to your industry
You may have extra risks inherent to your products or services. These might include your hours of service sale of controlled substances or other dangerous practices (such as skydiving or limo-driving).
Liability risk insurance can be a stand-alone policy or it can come in a business insurance package. The cost will be affected by your business’s level of risk (the type of product/service location hours staff training etc.). When you talk to your broker about liability risk insurance you should start by knowing if you need:
- General liability insurance: This is non-industry specific liability insurance which provides basic protections if your business is sued.
- Product liability insurance: If your small business makes or sells a product this is the insurance you need. It will cover you if you are sued for injury/damage caused by your product.
- Professional liability insurance: Also called “Errors and Omissions” insurance it is the “policy for people who make a living off their expertise” and it is a de facto requirement for services like consulting accounting or medical practice. In these fields it will hurt you not to have E&O liability insurance because clients will be unlikely to hire you.
Regardless of which type you need the time to get liability insurance is now. Don’t wait until you are in trouble. Call you broker and get covered.